When you run your own business, there is always a temptation to spend some of your personal money on it, especially when you are in the startup phase. However, keeping both your personal and business finances separated makes it easier to properly manage both. Here are some simple ways of achieving it.
Set Up Separate Bank Accounts
First and foremost, open a new bank account to take and pay out money for your business. Using a separate bank account has both practical and psychological advantages, making it much easier for you to manage both independently and to think of them separately. When it comes to setting your business budget and working out what you have available to cover your living expenses, an intermingling of the two can quickly make things messy. Having separate accounts makes it much easier to work them both out and also monitor each one individually.
Keep Your Receipts Separate
Your bank statements will be useful in keeping track of your spending, but it is always a good idea to hold on to receipts, especially for your business. You never know when you might be audited by the IRS, and they will sometimes expect you to have a reasonable amount of documentation more or less to hand. It’s not uncommon for them to want to see receipts for your business expenses. Keeping stuff like this organized makes everything go smoother when you need it.
Minimize Your Business Expenses
Every business has expenses and when you are at the helm of a business, you can sometimes feel pressured to fork out your own personal funds on business expenses if the situation calls for it. Needless to say, doing this is not going to help you to keep your finances separate. In fact, it is going to make things a lot harder.
When you do need to spend money on your business, take the time to shop around and get quotes from different potential suppliers. This applies to everything from office supplies to specialist equipment and software. One thing you can do to keep your expenses down is to make sure that you are only paying for features that you need. For example, if you are looking for PCB design software, only pay for one with a Gerber viewer if that is a feature that you need.
Use Separate Credit Cards
You have separate bank accounts for personal and business uses, so it makes sense to tie a different credit card to each one. This will help you to generally ensure that you consider your personal and professional debts separately. Like we said above, you should be working to keep your business expenses to a minimum. Being able to easily monitor these expenses on a single credit card bill will go a long way to helping you to keep your expenses as low as possible.
Many people find that having a separate credit card for their business and personal use makes it a lot easier for them to resist the temptation to use their personal cards to cover professional expenses.
If you are able to keep both personal and business finances separate, you will have an easier time managing both. Not only this, but you will also find yourself far less tempted to spend your personal money covering business costs that you don’t really need to incur.